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The conflict in Israel threatens much in the region and beyond. Rising tensions and security concerns also have potential repercussions on the country’s ambitions to grow its natural gas exports. 

In the space of little more than a decade, Israel has become a significant gas producer and regional exporter. It produced almost 22bn cubic metres of gas last year from its giant Leviathan and Tamar fields, of which, 9 bcm were piped to Egypt and Jordan. Chevron is a major shareholder in both fields. Israel’s NewMed Energy owns 45 per cent of Leviathan, while Abu Dhabi’s Mubadala owns 22 per cent of Tamar.

News that the Israeli government awarded a further 12 exploration licences over the weekend, to operators including Italy’s Eni, and BP, underscores its growth ambitions.

The immediate consequence of the conflict has been a shut-in of the Tamar field. This has caused exports to Egypt to dwindle, which is a serious problem for Israel’s much more populous neighbour. 

The cut in Israeli imports comes amid falling domestic production in Egypt. It was down 10 per cent in the first 8 months of the year, according to Greg Molnár at the International Energy Agency. The country experienced power cuts during the summer season. Last winter, Egypt managed to export 4.5 bcm of gas through its liquefaction infrastructure. Without a resumption of Israeli imports, it will struggle to repeat this feat. 

Israel has the potential to grow its natural gas production, perhaps by 15 bcm by 2026, through the ramp-up and development of existing fields. New exploration — such as that envisaged by the recently awarded licences — could add resources.

While not huge by international standards, Israel’s gas resources have regional and geopolitical importance. For instance, it is a potentially attractive source of — non-Russian — gas for Europe. New export routes, including an LNG terminal in Israeli waters, or a pipeline to Europe, have accordingly been floated, although the latter could need to overcome costly technical challenges.

Yet, for Israel’s budding gas sector, time is of the essence. The US and Qatar are rushing to increase LNG supply capacity. More of this fuel is widely forecast for the middle of the decade. Should the conflict slow the pace of investment, the country risks missing its moment.

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